Oregon dispensaries OK’d, but details still elusive

PORTLAND, Ore. — The Oregon Legislature just put the state medical marijuana program in the plant-inspection business.

But that’s not all. Under a broad set of authorities granted by the passage of a bill approving medical marijuana dispensaries, the state program will soon also run background checks, conduct on-site safety inspections and perform financial audits.

It’s all part of a legislative effort aimed at legitimizing the hundreds of Oregon dispensaries already operating in a legal gray area. As part of the bargain, the dispensaries will now submit to the same kind of scrutiny — and paperwork — as other types of businesses.

“There are many (dispensaries) right now that are paying taxes, paying worker’s comp, taking care of employees,” said Oregonians for Medical Rights lobbyist Geoff Sugarman, who drafted the bill. “The responsible thing to do for patients is to regulate these facilities.”

Gov. John Kitzhaber is expected to sign the bill, which was passed by the Oregon House on July 6.

Under the new system, a patient gives a grower or caregiver permission to take excess marijuana to a dispensary, which will reimburse the grower for the expense of cultivating the plant and distributing the pot.

The dispensary then charges the patient, though those costs aren’t necessarily the same number.

In a new twist on the current system, growers will also be able to charge for their labor. Specifically, “transferring, handling, securing, insuring, testing, packaging and processing usable marijuana and immature marijuana plants and the cost of supplies, utilities and rent or mortgage.”

That has opponents to the dispensary system alarmed. State Rep. Andy Olson, R-Albany, said he agrees marijuana has a medical use, but said the bill approving dispensaries will lead to widespread abuse.

“HB 3460 allows operators to set their own prices!” Olson said in a letter urging Kitzhaber to veto the bill. “Even currently it is being sold at a profit.”

Much about the Oregon dispensary system remains uncertain, because the Legislature gave the state marijuana program broad latitude for writing the dispensaries’ rules and a March deadline for doing it.

For one, the process by which the dispensaries will be audited is unclear. The bill directs the dispensaries to maintain records of transactions — what they spent, what they spent it on and who their customers are.

But the state marijuana program will have to determine how often it checks those costs, and who does the checking.

Another unclear element is labor costs, which will be determined by the grower, who can charge whatever he or she wants for the time spent cultivating.

But growers who seek to charge exorbitant labor rates may find that patients and dispensaries won’t pay up, said Jim Klahr, a patients’ advocate and advisory board member to the Oregon Medical Marijuana Program.

The rates of labor and overall reimbursement “are going to be set by the market,” Klahr said. “That, I think, is fair.”

The system is primed to enable growers to act as marijuana wholesalers and dispensaries as retailers. Advocates for the dispensary law say it creates a safe access point for patients who seek marijuana, and gives growers a greater financial incentive to keep the drug in the medical system and off the more lucrative black market.

The bill gives the state marijuana program four new employees — two for inspections and two to handle the paperwork — and $800,000 for two years.

With those new resources, the program plans to contract with laboratories to test marijuana for mold or pesticides, make sure the person responsible for the facility hasn’t had certain drug convictions and keeps its registration up to date, among other requirements written into the law.

Oregon passed a 1998 law legalizing medical marijuana that allows patients to possess 1.5 pounds of marijuana and 24 plants, only six of which are permitted to be producing marijuana. Dispensaries will themselves become another kind of card holder, but none of the limits on weight or number of plants will apply.

Given the vagaries of working with sometimes-finicky plants, which can fail or can produce a bumper crop, other states have sometimes found the dispensary model an upgrade, but insufficient to meet patients’ demands. In New Jersey, the Greenleaf Compassion Center in Montclair announced in June that it would close for two weeks, citing “inferior” crop yields and a lack of supply.

In California, supply hasn’t been a problem but the size of operations — and their profits — has sometimes drawn federal attention. More than two dozen California landlords face forfeiture proceedings because they allowed pot shops to rent space in their buildings.

In Oregon in 2010, the state’s interim U.S. attorney joined his counterparts in other medical marijuana states by sending warning letters to operations he felt were the most egregious offenders of the state’s medical marijuana law, threatening them — or their landlords — with civil asset forfeiture if they didn’t close shop.

With the pot shops up and running, they’ll be expected to follow the same rules of employment law as other businesses. That means stores whose primary purpose is the distribution of a federally-prohibited substance will pay federal taxes. IRS spokesman Richard Panick said pot shops wouldn’t be treated differently.

“It is, as with any employer, an application of employment tax law,” Panick said.

With advocates winning legalization of marijuana in Washington and Colorado, the dispensary system in Oregon also establishes a framework for a distribution system should voters approve it. A previous effort in 2010 fell flat at the ballot box — political observers say the measure was ill-worded and overly broad.

“The goal is satisfaction of the patient, not how much you can grow or how many plants you have,” Klahr said. “It’s going to create a place people can finally go.”